Mesoblast Limited (MSB) Earnings Call Transcript & Summary

Hello, and welcome to the corporate update from Mesoblast. An announcement and presentation have been lodged with the ASX and are available on the home and investor pages at www.mesoblast.com. [Operator Instructions] As a reminder, this conference call is being recorded. Before we begin, let me remind you that in today's conference, the company will be making forward-looking statements that represent the company's intentions, expectations or beliefs concerning future events. These forward-looking statements are qualified by important factors set forth in today's announcement and the company's filings with the SEC, which could cause actual results to differ materially from those in such forward-looking statements. In addition, any forward-looking statements represent the company's views only as of the date of this webcast and should not be relied upon as representing the company's views of any subsequent date. The company specifically disclaims any obligations to update such statements. With that, I would now like to turn the call over to Dr. Silviu Itescu, Chief Executive of Mesoblast. Please go ahead.

Thank you. Good afternoon, good morning, everybody. Thank you for joining us. On the line with me are Dr. Fred Grossman, our Chief Medical Officer; Roger Brown, our Head of Musculoskeletal Program; and Josh Muntner, our Chief Financial Officer. Today, we've announced the results from the Phase III randomized controlled trial of our allogeneic mesenchymal precursor cell therapy, rexlemestrocel-L, in 404 enrolled patients with chronic low back pain due to degenerative disc disease refractory to conventional treatment. The results indicate that a single injection of rexlemestrocel-L may provide a safe, durable and effective opioid-sparing therapy for patients with chronic inflammatory back pain due to degenerative disc disease. And the greatest benefits are seen when administered earlier in the disease process before irreversible fibrosis of the intervertebral disc has occurred. The durable pain reduction, as we've seen for at least 2 years from a single administration, indicates that rexlemestrocel-L has the potential to change the treatment paradigm for chronic low back pain due to inflammatory disc disease, a condition that affects as many as 7 million patients across the United States and Europe and to prevent or reduce opioid use and dependence. In this trial, patients were randomized to 1 of 3 treatments, either saline or an injection of rexlemestrocel-L alone or an injection of rexlemestrocel-L plus hyaluronic acid carrier. And patients were followed through 24 months and evaluated for reduction in pain using the Visual Analog Score, VAS, on disability of function using 2 different measurements, the Oswestry Disability Index or ODI and the EQ-5D Index. Key analyses were performed on the total study population and on the prespecified subsets of opioid users at baseline and on patients with back pain duration for either shorter or longer periods than the median. Median duration of back pain for those patients around this day was 68 months or approximately 5.5 years. In general, regulatory approval of pharmaceutical agents, such as opioids, in the treatment of chronic pain syndromes requires reduction in pain as the primary outcome. However, we're all aware of the opioid epidemic that is current in the United States. And as a result, the FDA has prioritized the focus on new therapeutics that target both pain reduction and opioid avoidance, particularly for the treatment of back pain, which accounts for 50% of opioid prescriptions. In addition to assessing the durability of pain reduction with rexlemestrocel-L, this study evaluated primary outcomes using composite measures of pain reduction together with functional responses to treatment as well as exploratory composites of pain reduction and functional responses in the context of opioid reduction. A single injection of MPC + hyaluronic acid carrier resulted in achievement of significant and durable reductions in chronic low back pain for 24 months across the entire evaluable study population of 391 patients compared with saline controls. And I would like you to focus on Slide 1, Figure 1 in the presentation, which shows clear separation in the mean change in pain from baseline, between the saline controls, those who received hyaluronic acid -- sorry, mesenchymal precursor cells on their own and those who received mesenchymal precursor cells together with hyaluronic acid carrier. The mean change in pain from baseline was significantly different in the MPC + HA carrier at both 12 months and at 24 months in the entire study. MPC alone showed reductions in pain that were intermediate between the 2 groups. These durable reductions in pain are consistent with results from an earlier randomized controlled Phase II trial, where the same dose and formulation of mesenchymal precursor cells, 6 million cells, in conjunction with hyaluronic acid, provided durable reductions in pain to 24 months. In that study, hyaluronic acid alone was not significantly different from saline, consistent with its effects as a carrier in this particular study. Greatest pain reduction was observed in the prespecified population with chronic low back pain of shorter duration in the study median of 68 months. This patient population was 194 patients who were evaluable. And they demonstrated that a single injection of MPC + hyaluronic acid carrier significantly reduced pain compared to sailing at all time points: 1, 3, 6, 12, 18 and 24 months. And I will ask you to look at Figure 2 in the presentation. This demonstrates that separation is even greater between the cell-treated patients and the saline controls. In addition, we observed significantly greater pain reduction in the prespecified patient subset of opioid users, of whom they were 168, also at all time points compared with saline controls. These data confirms the durable pain reduction that was observed with a combination of rexlemestrocel-L plus hyaluronic acid in the previous randomized controlled trial, where HA control alone was not significantly different from saline. Increased composite outcomes of reduction in pain together with improvement in function in those with back pain of shorter duration than 68 months were observed. However, the composite outcomes of pain and function did not reach statistical significance across the entire study. There were no safety concerns over the entire 24-month period of follow-up in the entire study population. Importantly, in patients using opioids at baseline, the results showed not just a reduction in pain, but also significant reduction in opioid use over 24 months in patients treated with MPC + HA of the order of approximately 40%. In contrast, opioid use was increased in saline controls. Treatment with MPC plus hyaluronic acid resulted in nearly 4x more opioid users achieving 50% reduction in pain as well as reduction in opioid use by 24 months than those treated with saline. As a result of these results, Mesoblast plans to meet with the FDA to discuss the results from this trial together with the earlier randomized controlled trial of MPC plus HA and potentially discuss approval pathways for rexlemestrocel-L as treatment for durable reduction in chronic low back pain due to degenerative disc disease with opioid-sparing activity. I think on that note, we will stop and would like to open the call to questions, please.

[Operator Instructions] The first question comes from Louise Chen from Cantor.

Congratulations on the data. So given the data that you reported today, where do you think your drug would fit into the treatment paradigm for chronic low back pain? Is it going to be after other pain drugs are used? Or could it be used earlier in lines of treatment? And then the second question I have is, what are your next steps to move this toward commercialization? It sounds like you may already have the trials you need. But will that be determined by the FDA? Or do you have a sense of if these are all the trials you need, and you'll be able to get approval from here?

Thank you, Louise. I think the first question was, when would we see this agent being used in the patient journey? I think it's important to note 2 things: number one is the degree of improvement in pain that was seen at 12 months and the 24 months; and number two was the durability through 24 months and perhaps even beyond 24 months. In fact, in the recently published Phase II trial of the exact same formulation in a randomized controlled study was just published in this month's journal of spine. What we show is that, in fact, a single injection of this treatment in the same patient population resulted in 36 months of durable pain reduction. So we are excited about this data, and we look forward to unveiling the 36-month results of this study. And hopefully, we'll see a symmetry with what we've seen in the earlier Phase II results. But in addition to that, it's really the degree of improvement in pain that is really important here. Overall, in the 390-odd patients that were studied, that received treatment, we see approximately a 26-point reduction in mean pain score at about 12 months and at about 24 months. When you look at the patients who were the greatest responders, those patients who were treated within 5 years of the onset of pain, we see even greater pain reduction of the order of about 36 points as early as 12 months, and that's durable through 24 months. That level of improvement in pain is unprecedented, quite frankly. What one expects to see with opioids and other such analgesics is about a 10-point improvement -- 10- to 15-point improvement maximum. And those studies have really been very short-term studies of the order of 4 to 6 months. We are not aware of studies that have demonstrated this degree of pain improvement with durability through 24 months like this. And so I think it's a therapy that will stand on its own in this patient population. On top of that, the patients who were referred for treatment here were refractory to conventional therapy. So I would expect that after 3- to 6-month of failing conventional therapies, most patients and physicians will want to have an injection of these cells before they're considered for opioid therapy or other alternatives. Dr. Grossman, would you like to comment on it?

Yes, I would. Thank you. I think it's important to realize that this is a patient population that is in desperate need of pain relief. Hence, most or many wind up on opioids, and we know that, at least in the U.S., there's an opioid epidemic. So it's not like there are treatments that are available that are adequate for these patients. And to see pain reductions as we're seeing here is very, very encouraging. And even more importantly, in those that were on opioids and in this study, both patients and the investigators were told to keep the medication stable and not make any changes. But even in those patients, there was a reduction in steroids. So we're very encouraged by this. And I think it's important to keep in mind that this is a very considerable unmet medical need, for which there aren't adequate treatments.

I think that was a second question that we were asked to comment on.

Yes, the path forward?

Yes. Again, Dr. Grossman, would you like to comment on the path forward given the concordant results now from 2 studies on 24 months of pain durability -- reduction?

Yes. We now have 2 studies that showed significant pain reduction. And we're fully prepared to have a discussion with the FDA of path forward. I think that with the opioid reductions that we see, we are certainly going to tap into the significant opioid epidemic that is occurring in the United States, for which both the Biden Administration as well as the FDA are paying special attention. And so we're going to get into discussions to see if there is an accelerated path. Or if we do need to do another study, we now have a very defined patient population, where we see very significant pain reduction. And we know the functional measures that were most sensitive in this study and, coupled together, we would have a high degree of confidence of moving forward.

The next question comes from Jason Kolbert from Dawson James Securities.

Yes, a bunch of questions. I'm not sure I understand your comments about the Biden Administration, and I could certainly argue it very directly the other way, but that's a non sequitur. Can you talk a little bit about the P values associated with the trial? And can you talk a little bit about your existing partnership and regions that are not partnered and what that means? I know that you guys are very aggressive in terms of business development. So where is business development in terms of regions that are not partnered? And what are you thinking about in terms of the U.S.?

Sure. I think the first question was on the P values. Look, the P values were significant, and these are prespecified outcome of mean change in pain from baseline -- stands on its merits. It's self-evident. I think there are a subset of patients where the results were even stronger. And certainly, in those with less than the median, the reduction in pain from baseline is substantially greater than even across the entire study, P values are much stronger. And even if you adjust for multiplicity, they remain highly [ significant ]. [ We are ] very positive about the statistical analysis. And with respect to the business development perspective, the U.S. is, by far and away...

Before you transition to there, given the P values and the strength of the data and given the safety data from all of the other trials outside of this indication, you must feel relatively confident or certainly enthusiastic that regulators could approve you based on this data. That's a reasonable assumption.